Bank of Lithuania

1. The Board reviewed the results of the examination of Ukio Bank performed on May 31 through July 9, 1999 and resolved to issue a warning to Ukio Bank with regard to the established shortcomings in its operations. The Board also instructed the Bank to remove all shortcomings in its operations and report to the Bank of Lithuania by 1 November 1999.

The examination focused on the main areas of operation - the status of management, asset quality, capital, profitability and assets and liabilities management on 1 May 1999 and during the period from the previous examination (1 January 1998) until 1 May 1999.

The examination established that Ukio Bank failed to remove all shortcomings listed in the previous examination report; the Bank does not have written procedures for all operations that would ensure sufficient internal controls; bank audit is not sufficiently formalised and the reporting procedures and terms are not defined.

2. In accordance with Article 14 of the Law of the Republic of Lithuania on Commercial Banks and Resolution No 144 of the Board of the Bank of Lithuania of 26 June 1997 on the Rules for Granting Permits of the Bank of Lithuania for the Acquisition and (or) Management of the Blocks of Shares of a Commercial Bank, the Board of the BoL resolved to grant permission to the Public Company Vilniaus Bank to acquire and manage over 2/3 (up to 100%) of the shares of Bank HERMIS.

The Board established that the permission to Vilniaus Bank to acquire and manage over 2/3 (up to 100%) of the shares of Bank HERMIS shall be valid on condition that the shares held by the shareholders of Bank HERMIS related to Vilniaus Bank are purchased until the first General Shareholders Meeting of Bank HERMIS after the date of this resolution and that the overall block of shares is acquired during the period of one year.

The Board also redefined the evaluation of the level of systemic risk in the banking sector by establishing that, in the event that the established level of systemic risk in the Lithuanian banking sector is exceeded, the Bank of Lithuania may not approve a bank merger; however, its final decision shall be taken with due regard to additional criteria set in Paragraph 4 of the document.

Taking into account the economic grounds for the proposed merger, its impact on other financial markets, the nature of competition in the banking sector and other factors, the Board of the BoL did not deem it necessary to object to the request of Vilniaus Bank to grant permission for the acquisition and management of over 2/3 (up to 100%) of the shares on Bank HERMIS.

3. The Board of the BoL approved the front and back graphic designs for the 10 litas denomination commemorative gold coin "The Smallest Gold Coin in the World. History of Gold" created by Giedrius Paulauskas. The 1.244 g (1/25 oz) coin of highest quality will be minted under an international programme.

This will be the second gold coin in the Republic of Lithuania. Its date of issue has been set for the end of 1999.

4. The Board of the BoL approved the front and back graphic designs for the 50 litas denomination commemorative silver coin for the 10th anniversary of the restoration of independence created by Gediminas Karalius and approved the inscription "FREEDOM IS AN ETERNAL VALUE OF THE NATION" on the edge of the coin. The coin will be issued in the first quarter of 2000.